Sam Bankman-Fried, the founder of bankrupt crypto exchange FTX, faced his ex-girlfriend in court on Wednesday. Caroline Ellison testified against Bankman-Fried, who is on trial accused of stealing billions from customers.
As the former head of Alameda Research, Bankman-Fried’s crypto trading firm, Ellison played a pivotal role in the scheme. In December, she confessed in court, stating, “I was fully aware that it was morally and legally incorrect.”Bankman-Fried has denied all the charges against him.
Ellison’s account of what happened in the lead-up to FTX’s collapse last year was highly anticipated. Once a leading global platform for crypto investors to purchase and trade digital currencies, the company filed for bankruptcy in November, with a staggering $8 billion reportedly unaccounted for.
Prosecutors allege that the fall came after Bankman-Fried stole billions in customer money via Alameda, which had an account at the firm that allowed it to withdraw virtually unlimited money.
Reportedly, he utilized the funds for property acquisitions, political contributions, and financing Alameda, a venture that engaged in high-stakes crypto bets, leading to complications as cryptocurrency markets soured in 2022.
When Alameda lenders came calling that year, they say Bankman-Fried directed Ellison to tap FTX customer funds to repay its debts. In a bid for a reduced sentence, she has confessed to various charges, including providing false information about the connection between the two companies.
Bankman-Fried’s lawyers have argued that Alameda’s relationship with FTX was characterized by business practices that were reasonable, given its role helping to ease trading on the platform.
In their opening arguments, they claimed that the firm’s problems were fueled by Ellison’s failure to heed Bankman-Fried’s warning to protect the firm against turmoil in the crypto markets.
Ellison’s testimony was colored by her on-off romantic relationship with Bankman-Fried, which was a source of stress for both, according to filings from prosecutors and her own writings which Bankman-Fried shared with the New York Times over the summer.
As a result, his bail was revoked, and he is now incarcerated, awaiting trial, following Judge Lewis Kaplan’s ruling that this action constituted witness intimidation.
Ellison met Bankman-Fried when they both worked at the investment firm Jane Street.
The daughter of MIT economists who earned a math degree at Stanford, she shared a family background rooted in academia and an ambition to make money to do good.
She is one of several members of Bankman-Fried’s inner circle to take the stand against him.
The outcome of Ellison’s testimony could be crucial to the case against Bankman-Fried. If she is able to provide credible evidence of his wrongdoing, it could significantly damage his defense.
